Spotify 18Q4 growth & margin analysis

Users

• MAU growth steady at 29.4%, with seasonal upticks in Europe and RoW.
• Guidance 19Q1: 218 million (midpoint), implies growth 25.7%.
• Premium subs growth down to 35.2%.
• Guidance 19Q1: 99 million (midpoint), implies growth 31.3%.
• Ad-supprted MAU growth 27.4%.

ARPU

• Down yoy but up qoq to EUR 4.89. Family and Student plans reduce the ARPU and so does expansion into lower GDP countries.

Usage

• Hours of consumed audio up 34% to 15 billion.
• This equals 25.1 hr/MAU/month (17Q4: 24.1).

Growth

• Revenue growth 30.2% to EUR 1.495 billion (guidance: EUR 1.45 billion).
• Split 29.7% for Premium subs and 34.6% for Ad-supported subs.
• Guidance 19Q1 revenue EUR 1.45 billion (mid-point) implies 27.3% growth.
• Guidance 2019 revenue EUR 6.575 billion (mid-point) implies 25.0% growth.

Margins

• Gross margin 26.7% (favourably impacted by non-recurring effects, otherwise 25.8%, which still includes the Google Home promotion in Q4: free Home Mini for new Family plans in the US). Guidance was 25.0%.
• Gross margin is strong in Top 5 markets, weaker elsewhere.
• Split 27.3% for Premium subs and 22.1% for Ad-supported subs.
• Guidance 19Q1 implies 23.5% (18Q1: 24.8%).
• Guidance 2019 implies 23.5%
• EBITDA margin second quarter in a row at positive level (6.8%).
• Operating margin first-time ever positive (6.3%). Positive impact from lower share price (reduces stock option and RSU costs), otherwise still higher than the guided (-0.7%).
• Guidance 19Q1 implies -5.9% (18Q1: -3.6%).
• Guidance 2019 implies -4.3%
• Second positive net result (EUR 442 million), impacted by Tencent Music IPO.

Cash flow

• Liquidity has been rising for many quarters, now at EUR 1.81 billion.